Federal Reserve ‘well positioned to proceed cautiously’ on interest rates, key official says

The Federal Reserve is “well positioned to proceed cautiously” on interest rate hikes after one of its most aggressive tightening cycles in decades, Boston Federal Reserve President Susan Collins said Wednesday.

“Overall, we are well positioned to proceed cautiously in this uncertain economic environment, recognizing the risks while remaining resolute and data-dependent, with the flexibility to adjust as conditions warrant,” Collins said in prepared remarks at the New England Council.

While the Fed “may be near, or even at, the peak” of rate hikes, Collins cautioned that “further tightening could be warranted,” depending on the data. She also said she expects rates to remain at restrictive levels for “some time.” 

“Patience will give us time to better separate ‘signal’ from ‘noise’ as we assess available data; and to balance risks, as the effects of tighter policy continue to work through the economy,” Collins added.

Her comments echo those of Fed Governor Christopher Waller, who suggested Tuesday that recent strong economic data will allow the Fed to “proceed carefully” as it considers another potential rate hike at its September meeting.

“That was a hell of a good week of data we got last week, and the key thing out if it is it’s going to allow us to proceed carefully,” Waller said on CNBC’s “Squawk Box,” adding, “We can just sit there, wait for the data, see if things continue.”

The August jobs report released Friday indicated the labor market may finally be cooling — the unemployment rate rose to 3.8 percent, and the economy added 187,000 jobs.

Job openings also fell to 8.8 million in July, marking its lowest level since March 2021, according to the Job Openings and Labor Turnover Survey released last week.